THIS JOINT LITIGATION
AGREEMENTis made between
Walter Industries, Inc., a Delaware corporation
(“WLT”), and Mueller Water Products, Inc., a Delaware
corporation (“MWA”), and by each of them for their
respective subsidiaries (together with WLT and MWA, the
“Corporate Entity Parties”), and their respective
affiliates, advisors, and agents, all to the extent reflected in
this Agreement (the “Parties”), effective as of
December 14, 2006 ( the “Spin-Off Date”).

WHEREAS,WLT acquired all of the outstanding equity of
MWA in October 2005;

WHEREAS,in May 2006, MWA sold shares of its Series A
common stock to public stockholders in an initial public offering
(the “IPO”), after which WLT, through its ownership of
all of MWA’s outstanding Series B common stock, retained
approximately 96% of the voting control of MWA, and approximately
75% of the economic value of MWA, so that the interests of WLT and
MWA continued to be substantially aligned;

WHEREAS,WLT intends to distribute all of its Series B
common stock of MWA to WLT’s shareholders of record on
December 6, 2006, effective December 14, 2006 (the
“Spin-Off”);

WHEREAS,the Corporate Entity Parties have been involved
in pending or potential claims and litigation referred to herein
and in the schedules hereto (the “Litigation”) that
involve or could potentially involve Corporate Entity Parties that
will not be affiliated with each other after the
Spin-Off;

WHEREAS,the Parties as identified herein have developed
a substantial amount of evidence and work product relating to the
Litigation and have, prior to the effective date of the Spin-Off,
engaged in communications that are protected by the attorney work
product, attorney-client, and joint defense privileges;

WHEREAS,the parties currently share certain information
that is protected as confidential, or under attorney-client
privileges, or as attorney work product, and the parties agree that
after the Spin-Off such information should continue to be treated
as confidential, or protected by attorney work product or
attorney-client privileges;

WHEREAS,the Corporate Entity Parties are willing to
provide access to such evidence and work product on certain
conditions; and

WHEREAS,the Corporate Entity Parties desire to allocate
responsibilities for the Litigation and any future litigation and
claims or potential claims (“Claims”) as
provided

D-1

herein and, to share insurance
coverages and indemnification from third parties that may be
available to both parties;

NOW, THEREFORE, in consideration of the foregoing
premises and of the mutual agreements and other good and valuable
consideration hereinafter set forth, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, intending to be
legally bound, do hereby agree as follows:

1. Statement
of Intent.

The Parties acknowledge that the
intent of the Spin-Off will be to separate the flow control
businesses of MWA from the distinct home construction and sales
related businesses and coal-related businesses of WLT. The
Parties note that such businesses are and have historically been,
unique and separate businesses, and that it is the intent of the
Parties that the Litigation and Claims referred to herein, and any
subsequent litigation related to any of the businesses of any of
the Corporate Entity Parties, should be allocated as much as
possible to the type of business out of which the Litigation or
Claim arose. Thus, it is the intent of the parties that MWA
be responsible for all Litigation and Claims arising from the flow
control businesses, and that WLT be responsible for all Litigation
and Claims arising from the home construction and sales related
businesses and coal-related businesses, and that Litigation and
Claims that relate to both shall be allocated and shared as agreed
to by the Parties, or as determined by the Arbitrator as set out
below.

2.
Allocation of Responsibility for Litigation and Claims.

(a)Schedule A Litigation. WLT
shall indemnify, defend and hold harmless MWA and the Corporate
Entity Parties affiliated with MWA immediately after the Spin-Off,
from and against any costs, expenses and damages assessed as a
result of the Litigation or Claims listed on Schedule A
hereto. Such Litigation and Claims shall be referred to as
the “Schedule A Litigation”.

(b)Schedule B Litigation. MWA
shall indemnify, defend and hold harmless WLT and the Corporate
Entity Parties affiliated with WLT immediately after the Spin-Off,
from and against any costs, expenses and damages assessed as a
result of the Litigation or Claims listed on Schedule B
hereto. Such Litigation and Claims shall be referred to as
the “Schedule B Litigation”.

(c)Schedule C Litigation. WLT and
MWA shall shares the costs, expenses and damages assessed as a
result of the Litigation or Claims listed on Schedule C hereto,
according to the allocations set out in Schedule C hereto, or, if
no allocations have been agreed between the Parties, then in such
amounts as the parties may agree in the future, or as their
interests in the Litigation or Claims may ultimately be decided
(the “Allocated

D-2

Share”). Such Litigation
and Claims shall be referred to as the “Schedule C
Litigation”.

3. Future
Litigation and Claims.

(a)With respect to future Litigation or
Claims, as soon as practicable after the identification of such
Litigation or Claims by any Party, the Parties shall consult with a
view to reaching an agreement on whether they can allocate
responsibility for such matters between the parties in accordance
with the statement of intent set forth in Section 1 of this
Agreement. It is the intent of the Parties that the
Litigation and Claims provided for be assumed fully by one Party or
the other, or that the parties agree to allocate responsibility for
such Litigation or Claims between themselves in the same fashion as
envisioned for the Schedule C Litigation.

(b)If the Parties are unable to
allocate responsibility for any Litigation or Claims hereunder,
then the Parties may agree that such allocations shall be as
determined by any third party (such as an outside law firm) who has
been granted authority by the Parties to determine such allocation,
or, any party may elect to cause any allocation to be determined by
an Arbitrator as set out below.

4. Fees and
Expenses.

(a)Except as provided herein, the
Corporate Entity Parties agree, for themselves and their
affiliates, to pay their own expenses in connection with the
Litigation, including attorneys fees and the fees and expenses of
their affiliates and agents.

(b)WLT shall be responsible for all
costs and expenses associated with the Schedule A Litigation,
including the costs of depositions, testimony and discovery
enforced on MWA and its affiliates, provided, however, that MWA or
its affiliates shall bear the costs of its own personnel and
internal legal counsel and those costs of its Corporate Entity
Parties.

(c)MWA shall be responsible for all
costs and expenses associated with the Schedule B Litigation,
including the costs of depositions, testimony and discovery imposed
on WLT and its affiliates, provided, however, that WLT or its
affiliates shall bear the costs of its own personnel and internal
legal counsel and those costs of its Corporate Entity
Parties.

(d)Except as provided on Schedule C,
WLT and MWA agree to share the expenses of the Schedule C
Litigation in proportion to their Allocated Share, with each
bearing their own expenses as they are incurred, sharing other more
extraordinary expenses (such as expert witness fees), and then
reconciling their expenses incurred for their common benefit when
any

D-3

Litigation or Claim is finally
concluded or at such other time as agreed by the
Parties.

(e)Representatives of the Parties shall
regularly discuss the need for payments hereunder, or to offset the
payments incurred by the Corporate Entity Parties, it being the
intent of the parties that no payments be made if the amount to be
paid is less than $10,000, until the Parties agree on a final
settlement of the amounts to be paid under this Agreement or until
the amount owed to one party hereunder exceeds $100,000. The
Parties shall have a telephonic or in-person discussion no less
frequently that quarterly for the first year following the
execution of this Agreement, and semi-annually thereafter, to agree
on any payments to be made hereunder, to modify the terms of this
Agreement as the Parties agree, or to agree on modifications to the
schedules.

(f)Any amounts to be paid hereunder
shall, to the extent not paid within 30 days after agreement to be
paid, bear interest at the Prime Rate until such amounts are paid
in full. As used herein, “Prime Rate” shall mean
the fluctuating interest rate announced from time to time by the
Bank of America as its prime rate.

5.
Protection of Information.

(a)For purposes of this Agreement, the
parties record that they have a common interest in the Litigation
and the Claims referred to herein, recognizing that they were under
common control and ownership in connection with prior actions and
communications with respect to the Litigation and
Claims.

(b)WLT and MWA agree to share evidence
and work product in connection with the Litigation and Claims,
including with their respective counsel, provided, however, that in
the event of disagreements regarding whether to settle any
Litigation or Claims, the parties shall be free to settle any such
Litigation or Claim, provided that the work product, evidence,
privileged materials and confidential information retained by the
settling party shall not be shared with any third parties without
the consent of any Corporate Entity Party that would have the right
to prevent the disclosure of any such information had the Spin-Off
not occurred.

(c)Each Corporate Entity Party agrees,
on its own behalf and on behalf of its agents, advisors, and
counsel, to protect any work product, evidence, privileged
materials and confidential information related to the Litigation
against disclosure as if it were their own information and to
assert the joint litigation privilege as a bar to the production of
any such information.

D-4

6. Prior
Coverages and Indemnification.

(a)Prior WLT Coverage

(i)With respect to Litigation or Claims
or other liabilities against MWA that are or may be, in the
reasonable judgment of MWA, covered by insurance policies held by
WLT or indemnification otherwise available to WLT on or prior to
December 14, 2006 (“Prior Coverage”), MWA shall pursue,
or, to the extent possible, WLT shall be authorized to pursue, such
claims on behalf of MWA in the amounts and in accordance with the
terms of such Prior Coverage, provided that such claims and
liabilities relate to matters that arose on or prior to December
14, 2006. WLT agrees that it will not, and will not permit
any affiliate, to terminate any Prior Coverage without MWA’s
consent. Promptly upon receipt of the proceeds of any such
Prior Coverage, WLT shall cause such proceeds to be paid to
MWA.

(ii)The Corporate Entity Party pursuing
the coverage will, or will cause its affiliates to, diligently
pursue all claims for Prior Coverage at MWA’s expense,
provided that in no event shall WLT be obliged to litigate or
pursue any other extraordinary remedies against any insurer or
indemnitor, except as provided in (iii) below.

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